Lender vs. Mortgage Broker - the DIFFERENCE

Real Estate Sales Representative with Fieldstone Real Estate

Attention: Buyers and Borrowers There IS A DIFFERENCE!

A lender is a specific lending institution, often times a bank, that lends their OWN money. When they pre-qualify you they are using the actual, real time standards that institution has in place. A pre-qualification means something. An approval means something. It means the person that has the money has agreed to give it to you.

A mortgage BROKER does not have any money to lend. A pre-qualification means that they THINK they can get a loan for you SOMEWHERE. The approval from the actual lender will generally come at the very last moment, and when it does the loan program may look very different than what you originally discussed.

When getting loans was easy, using a mortgage broker offered an advantage because they could look at all the products available on the market, and (theoretically) find you the best loan available - no matter who was offering it.

But, today, with loans being harder and harder to obtain, and guidelines and programs changing by the minute, you need to be talking to someone as close to the source of money as possible. When lenders change guidelines or discontinue a loan program, it is their own people who learn of the changes first; and their own people who have opportunities to close loans in progress under those programs. Any broker planning to use the same exact loan program runs a higher risk of not being told as changes are taking place, and of the programs vanishing before the loan can be securely placed and approved. Plus, many banks are considering brokered loans higher risk, since they do not know if that broker operates under the same standards that their employees do.

In my opinion, with our current climate, I do not recommend attempting to get a loan through any mortgage broker for any transaction that is critical or time sensitive (like a home purchase).  For refinancing, it is less risky to consider a mortgage broker.

You also want to use only reputable lenders. I recommend you speak to your real estate agent to get a referral... even if you're not buying, but just refinancing - ask your favorite real estate agent for a referral to their most trusted lenders. Remember, without a good lender, a real estate agent may never close a deal. They need to keep lenders who are trustworthy and knowledgeable very, very close to them. Conversely, those loan originators work hard for those agents that are sending them business....they know that messing up ONE loan could cost them the potential of a lot of future business from that agent. As the consumer, you can benefit from that relationship.


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Richard Mielke
RE/MAX Results - Gettysburg, PA
REALTOR, Gettysburg Pennsylvania Real Estate

Vicky, there are some mortgage brokers who are also direct lenders. I work with one who has a pool of investors who can save a transaction. In any case, I like to use someone who is local, who I can get ahold of.

Nov 22, 2008 05:38 AM #1
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